Company residence under sections 6(10) and 6(3): POEM and control

This is Part 2 of a three-Part series on tax residency under the Income-tax Act, 2025 and the Income-tax Act, 1961. Part 1 covers individuals: the day-count limbs, deemed residence, not ordinarily resident status, the treaty ladder for individuals and the FEMA contrast. This Part covers companies. Part 3 covers Hindu undivided families, firms, LLPs, associations of persons, trusts and every other person.

Take a foreign subsidiary of an Indian group. It is incorporated in Singapore, Dubai or Mauritius, it files nothing in India or files as a non-resident on Indian-source income, and its directors include one or two people who live in India. The Assessing Officer, prompted by a search, a survey, an information report or the Indian parent’s own records, proposes to treat it as resident in India on the footing that its real decisions are taken here. If that finding stands, the company’s worldwide income is taxable in India, its foreign tax becomes a matter for credit rather than exclusion, and every year it has been dormant in India is exposed.

Which test decides the question depends on the year. From tax year 2026-27 section 6(10) of the Income-tax Act, 2025 makes a foreign company resident if its place of effective management is in India, a single place where key decisions are in substance made, so that partial management abroad does not protect the company. The Income-tax Act, 1961 applied the same test, unchanged in substance, under section 6(3)(ii) from assessment year 2017-18, and it is under that text that every year from assessment year 2017-18 up to the previous year 2025-26 is still assessed and appealed. For assessment years up to 2016-17 a foreign company was resident only if the control and management of its affairs was situated wholly in India, a test that any real part of control exercised abroad defeated.

This Part takes both tests in turn, the Board’s guidelines and how they are used and resisted, the procedure the Assessing Officer has to follow, the treaty tie-breaker as the Multilateral Instrument has and has not changed it, and the tax residency certificate after Tiger Global. The law is stated by reference to the Income-tax Act, 2025 first, because it is the Act under which a company is assessed for tax year 2026-27 onwards. The Income-tax Act, 1961 continues to govern every tax year beginning before 1 April 2026, including proceedings for those years begun later (section 536(2)(c) of the Income-tax Act, 2025); the Indian authorities in this Part were all decided on the 1961 Act or its 1922 predecessor, and it is under the 1961 Act that most disputes now in litigation are argued.

Key points

• An Indian company is resident in every year. A company incorporated abroad is resident in India for a year if its place of effective management in that year is in India: section 6(10) of the Income-tax Act, 2025 from tax year 2026-27, and section 6(3)(ii) of the Income-tax Act, 1961 for earlier years from assessment year 2017-18.
• In the 1961 Act the place of effective management test was substituted by the Finance Act, 2015 with effect from 1 April 2016 and substituted again by the Finance Act, 2016 with effect from 1 April 2017, which changed the effectivity of the 2015 amendment; the Board records that the test applies from assessment year 2017-18 (Circular 6/2017, paragraph 3).
• Before that, section 6(3)(ii) of the 1961 Act made a foreign company resident only if control and management of its affairs was situated wholly in India. Any real part of central control abroad kept it non-resident, and the Department carried the burden. That test still governs assessment years up to 2016-17 in litigation.
• Circular 6/2017 of 24 January 2017 is the Department’s method: a presumption of management outside India for a company in active business outside India whose board mostly meets abroad, a two-stage enquiry for other companies, a list of factors, and prior approval of the Principal Commissioner or Commissioner and then of a collegium of three Principal Commissioners or Commissioners, with a hearing, before any finding. A company is in active business outside India if its passive income is not more than 50 per cent of its total income and less than 50 per cent of its assets, employees and payroll are in India, averaged over the year and the two years before it.
• Circular 8/2017 of 23 February 2017 says clause (ii) of section 6(3) of the 1961 Act does not apply to a company with turnover or gross receipts of Rs 50 crore or less in a financial year. The circular binds the Department; whether a court would uphold it, and whether it survives under the 2025 Act through section 536(2)(j), is open (open question 7). Circular 25/2017 of 23 October 2017 says a regional headquarters in India working within group-wide policies does not by itself create POEM in India.
• A company cannot be not ordinarily resident. It is resident and taxable on worldwide income under section 5(1), or non-resident and taxable only on Indian income under section 5(2), the same sub-sections in both Acts.
• Where a company is resident in both countries, the treaty decides: by place of effective management where the partner reserved against Article 4 of the Multilateral Instrument (Singapore, the UAE) or has not covered its treaty with India (Mauritius), and by competent authority agreement where the Instrument has replaced that rule because both States notified it (the United Kingdom, the Netherlands); under the treaty with Japan the competent authorities decide in any case. Where the tie-breaker has been replaced, a company has treaty relief, absent agreement, only to the extent the competent authorities agree, and under the treaty with Japan, because of Japan’s reservation, none at all. Under the India-UAE treaty a company is a UAE resident only if it is incorporated and managed and controlled wholly in the UAE.
• A tax residency certificate is an eligibility condition under section 159(8)(a) of the 2025 Act and section 90(4) of the 1961 Act, not conclusive proof: Tiger Global (Supreme Court, 15 January 2026).

Why a company’s residence decides the assessment

Residence matters for a company because of section 5. A resident is taxed under section 5(1) of the Income-tax Act, 2025 on all income from whatever source derived which is received or deemed received in India, which accrues or arises or is deemed to accrue or arise in India, or which accrues or arises outside India. A non-resident is taxed under section 5(2) only on the first two categories. Section 5(1) and (2) of the Income-tax Act, 1961, which govern earlier years, are in the same terms. For a foreign subsidiary that earns its income abroad, a finding of residence is the difference between no Indian tax and tax on everything.

The middle category of not ordinarily resident does not exist for companies. Section 6(13) of the 2025 Act confines it to individuals, Hindu undivided families by reference to their managers, and citizens and persons of Indian origin within its clauses (b) and (c); section 6(6) of the 1961 Act does the same in its clauses (a) to (d). Section 5(1)(c) of the 2025 Act and the proviso to section 5(1) of the 1961 Act, which keep income accruing outside India to a not ordinarily resident person outside the charge unless it is derived from a business controlled in or a profession set up in India, therefore never help a company.

Two further rules sharpen the consequence. Section 6(12) of the 2025 Act, carrying forward section 6(5) of the 1961 Act, says that a person resident in India for a year in respect of any source of income is resident for that year in respect of every other source. A company cannot be resident for its Indian investments and non-resident for its foreign trade. And residence is decided year by year: section 6(10)(a)(ii) asks whether the place of effective management is in India “in that tax year”, as section 6(3)(ii) asks whether it is in India “in that year”, and Circular 6/2017 itself says at paragraph 6 that POEM is to be determined on a year to year basis. A finding for one year is evidence for the next but does not decide it.

The finding also carries the company into Indian compliance for the year: return filing as a resident, tax on its foreign income at the rate applicable to a foreign company (paragraph F of Notification No. 29/2018), credit for foreign tax under the treaty or unilaterally, and the computation questions that the first year of residence throws up, which section 115JH and the notification under it address later in this Part. A finding of residence also brings the company within clause (a) of section 2(2) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which makes an assessee of a person resident in India within the meaning of section 6 of the 1961 Act in the previous year; that Act is taken in the Black Money Act article and on the assessee page. Whether such a subsidiary and its Indian parent are associated enterprises for transfer pricing is a different question, taken in Section 92A: is 26% shareholding enough for an associated enterprise.

The Indian company limb

Section 6(10)(a)(i) of the 2025 Act makes every Indian company resident, and section 6(3)(i) of the 1961 Act does the same for earlier years. Section 2(53) of the 2025 Act defines an Indian company as a company formed and registered under the Companies Act, 2013, with extensions corresponding to those in section 2(26) of the 1961 Act. Section 2(26) defines it as a company formed and registered under the Companies Act, 1956, together with companies formed under earlier company law in force in any part of India, corporations established by or under a Central, State or Provincial Act, and bodies declared by the Board to be companies, in each case only if the registered or principal office is in India (the proviso to section 2(26)). Incorporation decides the question. An Indian company managed entirely from London is resident in India; nothing in section 6 lets it argue otherwise.

The limb raises little difficulty, but it matters in two places. The first is the treaty: an Indian company whose management is in fact abroad may also be resident in the other country under that country’s law, and the treaty tie-breaker then decides where it is resident for treaty purposes, a point taken later in this Part. The second is the contrast with foreign exchange law. Under section 2(v)(ii) of the Foreign Exchange Management Act, 1999 any person or body corporate registered or incorporated in India is a person resident in India, and FEMA has no place of effective management test, so a foreign company held resident under section 6(10) or section 6(3) remains a person resident outside India under section 2(w) of that Act, although an office, branch or agency it owns or controls in India is itself a person resident in India under section 2(v)(iii). The contrast between the two statutes is set out in the FEMA section of Part 1.

Before 1 April 2017: control and management wholly in India

Until the substitution took effect, section 6(3)(ii) of the 1961 Act made a company resident in India in a previous year if, during that year, the control and management of its affairs was situated wholly in India. Circular 6/2017 recites that wording at paragraph 1 and records the Department’s own view of its weakness: it allowed companies to escape residence “by shifting insignificant or isolated events related with control and management outside India”. That is a fair description of how the test worked.

The test is not a dead letter. Every assessment year up to 2016-17 is still decided under it, and reassessments, search assessments and appeals for those years remain in the pipeline. The litigation for those years has to be run on the old test, and an Assessing Officer or appellate authority who applies the place of effective management test or the 2017 guidelines to a pre-2017 year is applying the wrong law.

The meaning of control and management

The phrase came from section 4A, inserted in the Indian Income-tax Act, 1922 by the amending Act of 1939, which used it for Hindu undivided families, firms and associations of persons in clause (b) and for companies in clause (c), and the authority on its meaning was built under that Act. The Supreme Court in V.V.R.N.M. Subbayya Chettiar v. CIT (21 December 1950), a Hindu undivided family case, said that the provision appeared to be based very largely on the rule applied in England to corporations, and quoted Lord Loreburn in De Beers Consolidated Mines Ltd. v. Howe:

“A company cannot eat or sleep, but it can keep house and do business. We ought, therefore, to see where it really keeps house and does business...... I regard that as the true rule, and the real business is carried on where the central management and control actually abides.”

The Court then set out the principles stated in Swedish Central Railway v. Thompson, the first of them being that residence of a company is located by asking “where is the head and seat and directing power of the affairs of the company”, and adopted Patanjali Sastri J’s explanation from the Madras High Court that control and management “signifies, in the present context, the controlling and directive power, ‘the head and brain’ as it is sometimes called”. The further principles it took from that case were that mere activity in a place does not create residence, that central management and control may be divided, and that a company may then have more than one residence.

The Bombay High Court applied these principles to a company in Narottam and Pereira Ltd. v. CIT (6 March 1953). The company was a subsidiary of Scindia Steam Navigation, registered in Bombay, with board and shareholder meetings in Bombay, and its whole business was stevedoring in Ceylon carried on by two managers under very wide powers of attorney. Chagla CJ held it resident. The distinction he drew is the one every file under the old test turns on:

“It is entirely irrelevant where the business is done and where the income has been earned. What is relevant and material is from which place has that business been controlled and managed.”

The Court accepted the assessee’s point that what mattered was actual control, “not the de jure control and management but the de facto control and management”, but found de facto control in Bombay on the board minutes: the managers’ powers of attorney could be cancelled at any moment, they had to carry out orders from Bombay and account to Bombay, and the minutes showed directions given to them from time to time. The same judgment explains why the company test was the converse of the test for families and firms: because the company had to be controlled wholly in India to be resident, “in the case of a company any measure of control and management of its affairs outside the taxable territories would make it non-resident”.

The burden and the board

The Delhi Tribunal’s decision in Radha Rani Holdings (P) Ltd. v. Addl. DIT (31 May 2007, assessment year 2002-03) is the leading modern application. The company was incorporated in Singapore. A shareholder resident in India held 99 per cent of its shares; the other director, who chaired every board meeting, lived in Singapore and had never visited India. The Assessing Officer and the Commissioner (Appeals) held it resident, relying among other things on the address from which it was said to operate and on evidence that the Indian shareholder-director was in India on the day of a Singapore board meeting.

The Tribunal allowed the appeal. It held at paragraph 14 that because the section required control wholly in India, even the slightest control exercised from outside India kept a foreign company non-resident, and that the burden was reversed as compared with families and firms:

“While in the case of HUF, firm or AOP, it is incumbent on the assessee to establish that control is wholly outside India, for them to be treated as a non-resident, in the case of a company, the Department has to establish that the control and management of its affairs is situated wholly in India, for the company to be treated as resident in India.”

At paragraph 17 it located control where the board meets and decides, not where directors live: the test “does not mean where one or more of the directors normally reside but where the board actually meets for the purpose of determination of the key issues relating to the company”. The 99 per cent holding did not give the Indian director power over the board. At paragraph 18 it rejected the attack on the minutes of a Singapore meeting held while the Indian director was shown to be in India, observing that meetings by telephone or video conference were common, that the assessee had not been put to question before the adverse inference was drawn, and that the minutes had been authenticated by the Indian High Commission in Singapore. At paragraph 20 it treated the Singapore tax residency certificate as material evidence of residence.

Two cautions go with Radha Rani. First, paragraph 20 describes Azadi Bachao Andolan as having held a certificate to be conclusive proof of residence; the Supreme Court did not say that, and after Tiger Global the point cannot be run in that form. Second, paragraph 15 quotes a passage on how control and management operates for companies, firms and families, including the sentence that the head and brain of a company is the board of directors, as the Supreme Court’s holding in CIT v. Nandlal Gandalal. That passage is from Hidayatullah J’s dissent in Nandlal Gandalal (21 April 1960), not from the majority judgment of S.K. Das J. It is a correct statement of the general rule, but on appeal it should be cited for what it is.

The Revenue has appealed against the order to the Delhi High Court (ITA 106/2008).

What the old test still decides

For assessment years up to 2016-17 the old test gives the assessee three advantages that the new test does not. The company is non-resident if any real part of its central control is exercised abroad. The Department must prove control wholly in India, on evidence of acts of control and not on shareholding or the residence of directors. And day-to-day operation in India, by managers or agents, does not amount to control and management, which Narottam and Pereira confines to the central, directing power. A reassessment notice or block assessment for a pre-2017 year that proceeds on “effective management in India” is answered first by pointing out that the year is governed by the wholly test.

Place of effective management: the statutory test

Section 6(10) of the Income-tax Act, 2025 states the test for tax year 2026-27 onwards:

“(10)(a) A company is said to be a resident in India in any tax year, if— (i) it is an Indian company; or (ii) its place of effective management is in India in that tax year; (b) for the purposes of this sub-section, “place of effective management” means a place where key management and commercial decisions necessary for the conduct of business of the company as a whole are, in substance, made.”

For earlier years the test is in section 6(3) of the Income-tax Act, 1961, which reached its present form in two steps. The Finance Act, 2015, by section 4(ii), substituted section 6(3) with effect from 1 April 2016. The Finance Act, 2016, by section 4, substituted it again with effect from 1 April 2017. The text reads:

“(3) A company is said to be a resident in India in any previous year, if— (i) it is an Indian company; or (ii) its place of effective management, in that year, is in India. Explanation.—For the purposes of this clause “place of effective management” means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.”

Circular 6/2017 at paragraph 3 records the effect of the second substitution: the Finance Act, 2016 “changed the effectivity” of the 2015 amendment, and the amended provision applies to assessment year 2017-18 and subsequent years.

The 2025 text speaks of the business “of the company as a whole” where the 1961 text says “of an entity as a whole”. Nothing turns on the change for a company, since only companies are tested under the clause in either Act, but a submission that quotes the definition should quote the Act for the year.

Four features of the definition do the work in a dispute.

A single place. The definition speaks of “a place”, and Circular 6/2017 at paragraph 6 states that an entity may have more than one place of management but only one place of effective management at any time. That is the decisive change from the old test, which allowed control to be divided and treated any division as fatal to residence. A company managed partly from India and partly from abroad is now resident if its effective management is in India, however much management happens elsewhere.

Key management and commercial decisions. The test is not where the business is done, nor where routine management happens, but where the decisions “necessary for the conduct of business … as a whole” are made. Circular 6/2017 gives examples at paragraph 8.2(g): opening a major new manufacturing facility or discontinuing a major product line are key commercial decisions; repairs and maintenance, quality controls and human resources policies run by a plant manager are routine operational decisions.

In substance. The words “in substance” let the Department look past formal board meetings to where decisions are actually taken. The same words let the assessee resist a finding built on form, such as the address of a registered office or the residence of a shareholder, unaccompanied by proof of where decisions were made.

In that year. The test is applied to the year in question. Circular 6/2017 adds at paragraph 10 that the principles are not to be applied to a particular moment, that a “snapshot” approach is not to be adopted, and that where POEM is found to be both in India and outside India during the year, it is presumed to be in India if it has been “mainly /predominantly” in India. That presumption is the Department’s gloss on the statute; whether it is right is open question 9.

Circular 6/2017: active business outside India

Circular 6/2017, issued on 24 January 2017 under F. No. 142/11/2015-TPL, is the document on which every POEM assessment is built. It is guidance, as paragraph 10 says (“No single principle will be decisive in itself”), but under section 119 of the 1961 Act it binds the Department, and the Assessing Officer who departs from it has to explain why. Under the 2025 Act the Board’s corresponding power is section 239, and section 536(2)(j) continues circulars issued under the repealed Act so far as they are not inconsistent with the new one.

The circular divides companies into two classes. For a company engaged in active business outside India (ABOI) it applies a presumption. For every other company it applies a two-stage enquiry.

The test of active business outside India

Paragraph 5(a) treats a company as engaged in active business outside India if its passive income is not more than 50 per cent of its total income, and three further conditions are met: less than 50 per cent of its total assets are situated in India; less than 50 per cent of its total number of employees are situated in India or are resident in India; and the payroll expenses incurred on such employees are less than 50 per cent of its total payroll expenditure. All four conditions must be met.

The Explanation to paragraph 5(a) prescribes how each figure is measured:

• Income is taken as computed for tax purposes under the law of the country of incorporation, or as per the books of account where that law requires no such computation.
• Assets are taken at the average of their tax values in the country of incorporation at the beginning and end of the year, for individually depreciable assets and for pooled blocks alike, and at book value for any other asset.
• The number of employees is the average of the numbers at the beginning and end of the year, and includes persons who, though not employed directly by the company, perform tasks similar to those performed by its employees.
• Payroll includes salaries, wages, bonus and all other employee compensation, including related pension and social costs borne by the employer.

Paragraph 5(c) defines passive income as the aggregate of income from transactions where both the purchase and the sale of goods is from or to associated enterprises, and income by way of royalty, dividend, capital gains, interest or rental income. Interest is not passive for a company in banking or a public financial institution whose activities are regulated as such under the law of its country of incorporation.

Paragraph 7.2 measures the test on the average of the data of the previous year and the two years before it, or the period of the company’s existence if shorter. Where the company’s accounting year under its home law differs from the Indian previous year, the accounting year ending during the previous year and the two before it are used.

The test is mechanical, and that is its value on a file. A company that wants the presumption must prove four ratios on documents the Assessing Officer can check: its foreign tax computations or accounts, its fixed asset register at tax values, its headcount at two dates with the contractors included, and its payroll. A company whose senior management sits in India is most exposed on payroll, because the circular’s Example 2 shows that three senior people resident in India can carry the payroll ratio over 50 per cent on their own: a company with 50 employees, 47 of them abroad, failed the test because the Rs 3 crore paid to its managing director, chief executive and sales head, all resident in India, was more than half of its Rs 5 crore payroll.

Passive income is the other trap. Income from goods both bought from and sold to associated enterprises is passive, but income from goods bought from third parties and sold to associated enterprises, or bought from associated enterprises and sold to third parties, is not. The circular’s Example 1 takes a sourcing company whose income is 30 per cent from purchases from third parties sold to group companies, 30 per cent from purchases from group companies sold to group companies, 30 per cent from purchases from group companies sold to third parties, and 10 per cent interest: only the 30 per cent group-to-group trade and the 10 per cent interest are passive, 40 per cent in all, and the first condition is met.

The presumption and its displacement

Paragraph 7 states the presumption:

“The place of effective management in case of a company engaged in active business outside India shall be presumed to be outside India if the majority meetings of the board of directors of the company are held outside India.”

The presumption is displaced under paragraph 7.1 if, on the facts and circumstances, it is established that the board is “standing aside and not exercising their powers of management” and those powers are being exercised by the holding company or any other person resident in India. Paragraph 7.1 also states what is not standing aside: a board that follows general and objective group-wide policies laid down by the parent in payroll, accounting, human resources, IT infrastructure and network platforms, supply chain functions and routine banking procedures, not specific to any entity or group of entities, is not standing aside for that reason.

The circular’s Examples 3 and 4 show the line. In Example 3 an active company with all its directors resident in India held five board meetings, three of them outside India; its POEM was presumed to be outside India, the directors’ residence notwithstanding. In Example 4 the same company’s senior management signed all contracts, but every contract above Rs 10 lakh had to go to the Indian parent for a decision, and more than 99 per cent of the contracts, consistently over the years, were above that figure. The circular says the effective management “may have been usurped” by the parent and the presumption may not apply.

The burden, on this structure, shifts. A company that proves the four ABOI conditions and a majority of board meetings abroad has the presumption. The Department then has to establish standing aside on facts, and paragraph 7.1 uses the word “established”. Example 4 shows the kind of evidence the Department looks for: an approval threshold, a pattern of referral to the parent, and the proportion of decisions that pass through it.

Circular 6/2017: companies not in active business outside India

A holding company, an investment company, a treasury or financing company, or a company that fails any of the four ABOI conditions has no presumption. For it paragraph 8 prescribes a two-stage process: first, identifying the person or persons who actually make the key management and commercial decisions for the conduct of the company’s business as a whole; second, determining the place where those decisions are in fact being made. Paragraph 8.1 adds that the place where decisions are taken is more important than the place where they are implemented, and that substance, not form, is conclusive.

The factors

Paragraph 8.2 lists the guiding principles.

(a) The board. The place where the board regularly meets and makes decisions may be the POEM, provided the board retains and exercises its authority to govern the company and does, in substance, make the key decisions. Mere formal holding of board meetings at a place is not conclusive. If key decisions are in fact taken elsewhere, that other place is relevant, as may be the case where board meetings are held away from the head office or away from where the predominant activity is carried on. If the board has de facto delegated the key decisions to senior management or to “any other person including a shareholder, promoter, strategic or legal or financial advisor etc.” and does nothing more than routinely ratify them, the POEM will ordinarily be where those people make the decisions.

(b) Executive committees. Where the board delegates to a committee of senior management that develops and formulates key strategies for formal approval by the full board, the committee’s location will often be the POEM. Delegation may be de jure, by resolution or shareholder agreement, or de facto, from the conduct of the board and the committee.

(c) Head office. The location of the head office is “a very important factor”, defined in paragraph 5(b) as the place where senior management and their direct support staff are located, or where they are primarily or predominantly located. For a decentralised company it is where senior managers are primarily based, where they return after travel, or where they meet to formulate key strategies. Where senior managers work from different places and meet by telephone or video, it is normally where the highest level of management, for example the managing director and the financial director, and their support staff are located. Where management is so decentralised that the head office cannot be determined with reasonable certainty, its location is of little relevance.

(d) Technology. Because decision-makers need not meet physically, the place where the directors or decision-makers, or the majority of them, usually reside “may also be a relevant factor”. This is the clause the Department will rely on against a company whose meetings are held abroad by video from India.

(e) Circular resolutions. For circular or round-robin resolutions, the frequency of their use, the type of decisions taken by them and where the parties are located are considered; the circular asks who has and exercises the authority to decide, and where that person is.

(f) Shareholders. Decisions reserved to shareholders under company law, such as a sale of substantially all assets, dissolution or changes in share rights, are generally not relevant. But a shareholder’s involvement can cross into effective management by a shareholders’ agreement or by conduct, as where shareholders limit the authority of the board and senior managers and remove the company’s real authority to decide. Whether it has crossed the line is a question of fact.

(g) Operational decisions. Day-to-day routine decisions by junior and middle management are not relevant; where the same person takes both kinds of decision, the two are to be distinguished and the key decisions located.

Paragraph 8.3 lists two secondary factors, used only if the primary ones do not identify the POEM: the place where the main and substantial activity of the company is carried out, and the place where its accounting records are kept.

Isolated facts

Paragraph 9 insists that POEM is to be found on all relevant facts and not on isolated facts that do not by themselves establish effective management. It gives five examples of facts that are not conclusive: that the foreign company is completely owned by an Indian company; that it has a permanent establishment in India; that one or some of its directors reside in India; that local management is situated in India for activities the company carries on in India; and that support functions that are preparatory and auxiliary in character exist in India.

Paragraph 9 is the assessee’s most useful paragraph. A finding of POEM that rests on any of those facts alone, or on a combination of them without evidence of where key decisions were made, departs from the Board’s own guidance. Example 5 applies the same principle across a group. An intermediate holding company whose POEM is in India because the ultimate parent exercises it does not carry its subsidiaries with it: “Each subsidiary has to be examined separately”, and subsidiaries in active business outside India whose board meetings are mostly held abroad are presumed to have their POEM outside India.

The Rs 50 crore threshold and the regional headquarters clarification

Two later circulars narrow the circular’s reach.

Circular 8/2017 of 23 February 2017 recites that a press release of 24 January 2017 had said the guidelines would not apply to companies with turnover or gross receipts of Rs 50 crore or less, and then states at paragraph 2:

“In view of above, it is clarified that existing provision of clause (ii) of sub section (3) of section 6 of the Act, shall not apply to a company having turnover or gross receipts of Rs. 50 crores or less in a financial year.”

The wording is wider than the press release. The press release spoke of the guidelines; the circular speaks of the statutory clause itself. On its face, a foreign company with turnover or gross receipts of Rs 50 crore or less is outside clause (ii) altogether, and the Department cannot hold it resident on POEM. The circular is silent on how turnover is measured (whose accounts, in what currency, at what rate), and whether a company that crosses Rs 50 crore in one year but not another is in or out year by year. Its validity and its survival under the 2025 Act are open question 7.

Circular 25/2017 of 23 October 2017 answered representations from multinational groups with regional headquarters in India. It repeats paragraphs 7 and 7.1 of Circular 6/2017 and clarifies at paragraph 5 that so long as the regional headquarters operates for subsidiaries or group companies within the general and objective principles of global policy laid down by the parent in payroll, accounting, human resources, IT infrastructure and network platforms, supply chain and routine banking, and not specific to any entity, that by itself is not a case of the board standing aside, and the regional headquarters’ activities in India alone will not establish POEM for the subsidiaries. Paragraph 6 warns that the provisions of Chapter X-A, the general anti-avoidance rule, “may get triggered” where the clarification is used for abusive or aggressive tax planning. The GAAR framework is taken in GAAR: what makes an arrangement impermissible under section 96.

Procedure: prior approval and the collegium

Paragraph 11 of Circular 6/2017 requires the Assessing Officer, before initiating any proceedings for holding a company incorporated outside India to be resident on the basis of its POEM, to seek the prior approval of the Principal Commissioner or the Commissioner. Paragraph 11.1 goes further. If the Assessing Officer proposes to hold the company resident, the finding is to be given only after prior approval of a collegium of three members, Principal Commissioners or Commissioners, constituted by the Principal Chief Commissioner of the region, and:

“The collegium so constituted shall provide an opportunity of being heard to the company before issuing any directions in the matter.”

These are two separate safeguards at two separate stages. The first is a precondition to initiating proceedings on POEM. The second is a precondition to the finding, and it carries a right of hearing before a body other than the Assessing Officer.

On a file, both are grounds of appeal of the first rank. A circular issued under section 119 binds the authorities administering the Act; Tiger Global itself describes earlier circulars as “binding on the Revenue at the time of their issuance” (paragraph 27; paragraph numbers in this Part are those of R. Mahadevan J’s judgment, J.B. Pardiwala J’s concurring opinion being numbered separately), and section 6(3) still stands in the form, substituted by the Finance Act, 2016, under which Circular 6/2017 was issued. An assessment that holds a foreign company resident on POEM without the Principal Commissioner’s prior approval to initiate, or without the collegium’s prior approval and hearing, has been made in breach of the Board’s procedure. The Revenue’s answer is that the circular is guidance, that neither section 6(10) nor section 6(3) contains such a condition, and that a procedural lapse under a circular does not oust jurisdiction conferred by the statute. Our view is that the hearing before the collegium is the kind of safeguard a court will enforce, because the circular makes it a condition of the finding and the company has no other forum before the order in which to meet the case against it; the approval to initiate is more easily treated as internal administration. Either way, the record should show whether the approvals were obtained, when, by whom, and on what material, and the company should ask for copies at the assessment stage.

How the Department builds a POEM case, and what the record has to show

A POEM case is built from material about people: the residence and travel of directors, the location of the email servers and senders that carry decisions, the minutes and their signatories, approval matrices and delegations of authority, bank mandates and who operates them, the employment contracts and payroll of senior managers, and the Indian parent’s own board papers in which the subsidiary’s decisions are discussed. In a search case it is built from what is found in India: a laptop holding the subsidiary’s board packs, signed but undated resolutions, or correspondence in which the Indian promoter instructs the foreign directors.

The Department’s case is then assembled on the circular. For an ABOI company the attack is on the four ratios, in particular payroll or employees resident in India, and on standing aside under paragraph 7.1, with Example 4 as the model. For other companies the attack is on the two stages of paragraph 8: identifying the Indian promoter or senior managers as the persons who make key decisions, and showing that they make them in India, with paragraph 8.2(a)’s warning about formal meetings and routine ratification, and paragraph 8.2(d)’s factor of where the decision-makers usually reside.

The answer is also built from documents, and the documents have to exist for the year in question. A file that will survive a POEM enquiry should contain:

• the ABOI computation for the year and the two preceding years, with the underlying foreign tax computation or accounts, the asset values for tax in the home jurisdiction, the headcount at the beginning and end of each year including contractors performing employee-like tasks, and the payroll split by employees in and outside India;
• board minutes showing where each meeting was held, who attended from where and by what means, and what was decided, together with the papers placed before the board; where any director joined from India, the minutes should say so;
• the delegation of authority: what the board has delegated, to whom, with what limits, and evidence that the delegates exercise it where they are;
• the head office: where the managing director, the finance head and their support staff are based, their employment contracts and their days in each country;
• for decisions taken by circular resolution, the record of who proposed, who approved and where they were;
• the group policies relied on under paragraph 7.1 and Circular 25/2017, showing that they are general, objective and not specific to the company;
• the residence certificate and the Form No. 41 information (Form 10F under the 1962 Rules) for the year, and the home jurisdiction’s tax return.

On appeal the question is whether the Department has shown where key decisions were in substance made. Circular 6/2017 at paragraph 9 rules out ownership, directors’ residence, a permanent establishment, local management of Indian activities and auxiliary support functions as sufficient by themselves. A finding that is built on any of them without evidence of decision-making is the weakest kind of POEM finding and should be attacked as such.

A foreign company resident for the first time: section 220 and section 115JH

A foreign company held resident on POEM faces computation problems the rest of the Act was not written for: its depreciation and losses were never computed under Indian law, its foreign tax has to be credited, and the anti-avoidance rules assume a resident from the start. Section 220 of the 2025 Act provides that where a foreign company is said to be a resident in India in any tax year and has not been a resident in India in earlier tax years, then, irrespective of anything in the Act and subject to conditions notified by the Central Government, the provisions relating to computation of total income, treatment of unabsorbed depreciation, set off or carry forward and set off of losses, collection and recovery, and special provisions relating to avoidance of tax apply with such exceptions, modifications and adaptations as the notification specifies. Section 115JH of the 1961 Act, in Chapter XII-BC, is in the same terms for a foreign company resident in a previous year and not resident in any preceding previous year.

The Central Government exercised the power under section 115JH by Notification No. 29/2018 (S.O. 3039(E)) of 22 June 2018, deemed to have come into force from 1 April 2017. It applies where a foreign company is resident in India on account of its place of effective management in a previous year and was not resident in any preceding year. It fixes the opening written down value of depreciable assets from the foreign tax record, or, where the foreign law does not require depreciation to be taken into account, as though depreciation had been allowed under that law, or, where the company is not assessed abroad, from its books; carries in brought forward loss and unabsorbed depreciation year-wise on the same basis, to be set off only against income that has become chargeable in India because the company became resident; deals with accounting years that do not end on 31 March; allows relief for foreign tax under section 90 or section 91, with credit apportioned where income is taxed over more than one year; and does not apply to income that would have been chargeable in India even if the company had not become resident (paragraph B). Paragraph C applies the same adaptations to a succeeding year in which the company is resident, carrying forward the written down value, loss and unabsorbed depreciation as arrived at on the last day of the preceding year; paragraph D provides that the company’s transactions with others are not altered only because it has become resident; and paragraphs A(x) to (xii) keep the tax deduction provisions applicable to it as a foreign company, and extend section 195(2) to payments made to it. Paragraph E keeps the company a foreign company for every other purpose: provisions specifically applicable to a foreign company continue to apply, those specifically applicable to non-residents do not, and those specifically applicable to residents do; and paragraph F provides that where a provision applicable to the company as a resident conflicts with one applicable to it as a foreign company, the latter generally prevails, so that the rate of tax remains the rate applicable to a foreign company even though its residential status changes on the basis of place of effective management.

The proviso to section 115JH(1) extends the notification to later years: where residence is determined in the assessment proceedings for a year, the notified regime also applies to any succeeding previous year if the company is resident in that year and the year ends on or before the date on which the assessment is completed. Section 115JH(2) withdraws the benefit if the notified conditions are later breached: the benefit is deemed wrongly allowed and the Assessing Officer may recompute under section 154, with the four-year period reckoned from the end of the year of failure. Section 115JH(3) requires every notification to be laid before Parliament.

Section 220 sets the provision out in five clauses in sub-section (1), with rectification under section 287 in place of section 154. There is one difference of drafting. Section 220(2) extends the notified regime to any other tax year succeeding the year of determination “which ends on or before the date of completion of such assessment proceeding”, without repeating the 1961 proviso’s condition that the company be resident in India in that succeeding year. Whether the omission matters is open. Notification No. 29/2018 was issued under section 115JH of the 1961 Act, and section 536(2)(j) of the 2025 Act continues a notification issued under the repealed Act so far as it is not inconsistent with the corresponding provision, which for this purpose is section 220. The better reading is that the regime can only apply in a year in which the foreign company is resident, since section 220(1) is itself confined to a foreign company “said to be a resident in India”, and paragraph C of the notification applies only to a succeeding year in which the company is resident.

The provision matters on a file for one reason beyond computation: it is the statute’s own recognition that a foreign company’s first year of residence is a special case. A company held resident should claim the adaptations in Notification No. 29/2018 in the assessment and in the appeal, including the foreign company rate under its paragraph F, and the Department’s computation should be tested against them.

The decided cases on POEM

Two Delhi Tribunal orders touch the substituted section 6(3)(ii), neither of them a contested finding of POEM in India.

In Sage International Inc. v. ACIT (10 April 2023, assessment year 2018-19), a United States subsidiary of an Indian company had itself declared residence in India on POEM, offered its United States income to tax in India and claimed credit for United States tax. The Assessing Officer, on the Dispute Resolution Panel’s directions, denied the credit, holding that a change of residence on POEM “is not available at the choice of the assessee company” and that the company remained non-resident, while still taxing the income. The Tribunal allowed the credit on the ground that the same income had suffered tax in the United States and that, if the lower authorities’ view on POEM were right, the income could not have been taxed in India at all. It did not decide where the company’s POEM was.

In THR Infrastructure Pte. Ltd. v. DCIT (12 May 2023, assessment year 2017-18) the issue was treaty exemption for capital gains of a Singapore company. Among its findings, the Tribunal said at paragraph 26 that the company’s place of effective management was in Singapore “owing to the conducting of Board meetings and placing of the Directors at Singapore”, and at paragraph 27 that the Revenue’s allegation that control and management was in India was not proved, treating the Singapore certificate as sufficient. The finding is one sentence and was made before Tiger Global.

Neither order construes Circular 6/2017, and neither answers open questions 7 to 10.

Dual residence and the treaty: Article 4 and the MLI

A foreign company held resident in India is usually also resident in its country of incorporation under that country’s law. Where a treaty applies, section 159(4) of the 2025 Act and section 90(2) of the 1961 Act apply the Act only to the extent it is more beneficial, and Article 4 of the treaty decides residence for treaty purposes. The domestic finding of residence is not displaced; what the treaty decides is which State is the State of residence for allocating taxing rights.

The tie-breaker

Many of India’s treaties, as signed, follow the older OECD model for persons other than individuals. The India-Singapore agreement, Article 4(3):

“Where by reason of the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.”

The Supreme Court in Azadi Bachao Andolan (7 October 2003), on the same clause in the India-Mauritius treaty, confined it to its office:

“The DTAC requires the test of ‘place of effective management’ to be applied only for the purposes of the tie-breaker clause in Article 4(3) which could be applied only when it is found that a person other than an individual is a resident both of India and Mauritius.”

The point has two edges. The tie-breaker arises only when the company is resident in both States under paragraph 1, so the first question is always whether the company is a resident of the other State under that State’s law. And once the tie-breaker arises, it asks a question about place of effective management under the treaty, which is not necessarily answered by Circular 6/2017.

The definition of resident in paragraph 1 varies by treaty, and on some files it decides the case before the tie-breaker is reached. India-Singapore Article 4(1) treats as resident any person who is resident “in accordance with the taxation laws of that State”. India-UAE Article 4(1), as substituted by notification S.O. 2001(E) of 28 November 2007, is different: in the case of the UAE, a resident is “an individual who is present in the UAE for a period or periods totalling in the aggregate at least 183 days in the calendar year concerned, and a company which is incorporated in the UAE and which is managed and controlled wholly in UAE”. A UAE company whose management and control is partly in India is not a UAE resident for the treaty at all, so it never reaches the tie-breaker in Article 4(4) and cannot claim the treaty’s protection as a resident of the UAE. For a UAE company the treaty question is therefore the old wholly test, applied in reverse, before it is a POEM question.

Article 4 of the Multilateral Instrument

Article 4(1) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting replaces the POEM tie-breaker with a mutual agreement test:

“Where by reason of the provisions of a Covered Tax Agreement a person other than an individual is a resident of more than one Contracting Jurisdiction, the competent authorities of the Contracting Jurisdictions shall endeavour to determine by mutual agreement the Contracting Jurisdiction of which such person shall be deemed to be a resident for the purposes of the Covered Tax Agreement, having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. In the absence of such agreement, such person shall not be entitled to any relief or exemption from tax provided by the Covered Tax Agreement except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting Jurisdictions.”

Article 4(3) allows a party to reserve against the Article, wholly or for particular kinds of existing provisions, or under Article 4(3)(e) to replace the last sentence of paragraph 1 so that no relief is available without agreement, and Article 4(4) provides that an existing tie-breaker is replaced only where all the contracting jurisdictions have notified it; otherwise paragraph 1 supersedes the existing provision only to the extent of incompatibility.

India deposited its instrument of ratification on 25 June 2019. Its final list of reservations and notifications makes no reservation under Article 4 and notifies the existing tie-breaker in its listed treaties, among them Article 4(3) of the treaties with Singapore, Mauritius, the Netherlands and the United Kingdom, Article 4(4) of the treaty with the UAE, Article 4(3) and (4) of the treaty with the USA (a notification without effect, since the United States is not a party to the Convention), and Article 4(2) of the treaty with Japan.

Whether the tie-breaker is replaced depends on the other party. Singapore, the UAE and Mauritius each reserved the right for the entirety of Article 4 not to apply to their covered tax agreements, and Germany did the same. Their treaties with India therefore keep the POEM tie-breaker. Mauritius and Germany have not in any case listed their treaties with India as agreements covered by the Convention, so those treaties are untouched by it. The Netherlands and the United Kingdom each notified Article 4(3) of its treaty with India, so in those treaties the mutual agreement test replaces the POEM rule, subject to the Convention’s rules on entry into effect for the particular tax and year; the Department’s synthesised texts of both treaties print Article 4(3) as replaced by Article 4(1) of the Convention. Japan reserved under Article 4(3)(e) to replace the last sentence of paragraph 1, so that absent agreement no relief at all is available, and notified Article 4(2) of its treaty with India, which already left the residence of a dual resident to the competent authorities. As both States notified it, the Department’s synthesised text shows that paragraph replaced, for persons other than individuals, by Article 4(1) as modified by Japan’s reservation, so that without agreement a dual-resident company has no relief under that treaty.

On a file the sequence is fixed. Find the treaty’s Article 4 as it stands for the year; check whether the partner listed its treaty with India as a covered agreement, whether it reserved against MLI Article 4, and whether both sides notified the provision (where only one side notified, Article 4(1) supersedes the treaty only to the extent the treaty is incompatible with it); if the POEM tie-breaker survives, the case is argued on the facts of decision-making; if it has been replaced, the company’s treaty protection depends on a competent authority agreement it must apply for, and until then it has relief only to the extent the authorities agree (under the treaty with Japan, none at all).

The tax residency certificate for a company

For tax year 2026-27 onwards the condition is in section 159 of the 2025 Act, which merges sections 90 and 90A of the 1961 Act. Section 159(8) entitles a non-resident to treaty relief only when (a) a certificate of residence is obtained from the other Government and (b) he provides such other documents and information as may be prescribed. Rule 75 of the Income-tax Rules, 2026 prescribes Form No. 41 for those documents and information, requires the assessee to keep and maintain the documents substantiating it, and provides for an Indian resident’s application in Form No. 42 and the certificate in Form No. 43.

Under the 1961 Act, which governs earlier years, section 90(4), inserted by the Finance Act, 2012 with effect from 1 April 2013, provides that a non-resident to whom a treaty applies “shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory”. As first enacted the certificate had to contain prescribed particulars; the Finance Act, 2013 removed those words and inserted section 90(5), which requires the assessee also to provide such other documents and information as may be prescribed. Rule 21AB of the Income-tax Rules, 1962 prescribes Form 10F for that information: status, nationality or country of incorporation, tax identification number in the country of residence, the period for which the certificate applies, and the address abroad, none of which need be repeated if the certificate contains it; sub-rule (2A) requires the assessee to keep the documents that substantiate the information. Rule 21AB(3) and (4) provide for an Indian resident to obtain a certificate of residence from the Assessing Officer in Form 10FA, issued in Form 10FB.

What the certificate proves

The Supreme Court in Azadi Bachao Andolan upheld Circular 789, which had said that a Mauritius certificate of residence would constitute sufficient evidence of residence and beneficial ownership. Its holding was that the circular was a valid exercise of the Board’s power and did not take away the Assessing Officer’s jurisdiction; the Court did not itself call the certificate conclusive. Later decisions read Azadi more strongly. The Delhi High Court in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. v. ACIT (30 January 2023) held at paragraph 93 that the Revenue “cannot go behind the TRC issued by the other tax jurisdiction as the same is sufficient evidence to claim treaty eligibility, residence status, legal ownership”, and its paragraph 83 describes Azadi as having held the certificate conclusive. On 12 January 2024 the Supreme Court granted the Revenue leave to appeal against that judgment and stayed it, directing at the same time that the Revenue should not in the meanwhile proceed to collect the amount assessed from the company (SLP (C) Diary No. 49801 of 2023). It was decided before Tiger Global, and its reasoning on the certificate has to be read with that judgment.

Tiger Global (15 January 2026) changes the footing. The Supreme Court held at paragraph 27 that the amendments to Chapter IX after Vodafone, the insertion of Chapter X-A, the amendments to rule 10U and the treaty had “completely changed the scenario”, and that circulars issued earlier “cannot override subsequent statutory amendments”. At paragraph 37:

“Section 90(4) of the Act only speaks of the TRC as an “eligibility condition”. It does not state that a TRC is “sufficient” evidence of residency, which is a slightly higher threshold. The TRC is not binding on any statutory authority or Court unless the authority or Court enquires into it and comes to its own independent conclusion.”

And at paragraph 43:

“Undoubtedly, the mere holding of a TRC cannot, by itself, prevent an enquiry subsequent to the amendments brought into the statute, particularly by the introduction of Section 90 (2A) and Chapter XA to the Act and the Rules, if it is established that the interposed entity was a device to avoid tax.”

At paragraph 29 the Court said that, the provisions having “undergone a sea change by amendments to Chapter IX, Chapter XA of the Act and Rule 10U”, Assessing Officers are now empowered to determine where taxable entities are really resident “by investigating the centre of their management”. Those words repeat the contention Azadi Bachao recorded for the respondents, who lost; Tiger Global adopts them on the strength of the amendments it names. Paragraph 30 states that, under the India-Mauritius Article 4(3), a person other than an individual found resident in both States cannot avail the treaty benefit; the text of that article as the Supreme Court itself quoted it in Azadi deems such a person resident of the State of its place of effective management, and a submission relying on paragraph 30 for the consequence of dual residence should be measured against the treaty text.

The certificate the other way round

The Ahmedabad Tribunal in Skaps Industries India Pvt. Ltd. v. ITO (21 June 2018, assessment years 2013-14 and 2014-15) dealt with the opposite case: a payer who had not deducted tax on payments to a United States entity, and an entity that had no certificate. It held at paragraphs 7 to 10 that section 90(4) has no non-obstante clause against section 90(2), and concluded at paragraph 10 that “an eligible assessee cannot be declined the treaty protection under section 90(2) on the ground that the said assessee has not been able to furnish a Tax Residency Certificate in the prescribed form”. It added at paragraph 12 that the assessee must still establish treaty entitlement on evidence, held at paragraphs 14 and 15 that a Form W-9 did not establish fiscal domicile in the United States, and remitted the matter. Skaps was decided before Tiger Global, and its reading of section 90(4) as a provision that can only benefit the assessee sits uneasily with the Supreme Court’s description of the certificate as an eligibility condition; but the reasoning divides. Its observation at paragraph 9 that an Assessing Officer, once a certificate in the prescribed form is furnished, “is denuded of the powers to requisition further details in support of the claim of the assessee for the related treaty benefits” cannot survive the Supreme Court’s statement that the certificate is not binding on any statutory authority or court “unless the authority or Court enquires into it and comes to its own independent conclusion” (paragraph 37). What survives is the holding at paragraph 10 that the absence of a certificate does not by itself defeat a claim proved otherwise, and the insistence at paragraphs 12 to 15 that treaty residence must still be proved under Article 4(1).

For a company, the practical result is that the certificate opens the door and the record has to hold it open. A foreign company that relies on a treaty should hold, for each year, its certificate, its Form No. 41 or Form 10F information, and the evidence of where its key decisions were taken, because after Tiger Global the Assessing Officer may enquire into the centre of management whatever the certificate says.

Certificates and a foreign year that is not April to March

Where the other State’s tax year does not run from April to March, a company’s certificate may be stated for a year that straddles two Indian tax years; the India-Singapore treaty, for example, defines Singapore’s fiscal year as the calendar year (Article 3(1)(g)). Form No. 41 asks for the tax year (item 7) and, separately, for the “Period for which the residential status as mentioned in the certificate referred to in section 159(8) is applicable” (item 11); Form No. 10F, for years up to 2025-26, asks for the period at item (v); and the Department’s explanatory note to Form No. 41 says that the certificate “must be valid for the relevant financial year in India”. A foreign company claiming relief for a whole Indian tax year should therefore hold certificates that between them cover it, and a payer deducting tax at the time of credit or payment, whichever is earlier (section 393(2)(b) of the 2025 Act; section 195(1) of the 1961 Act), should see the one covering that date. The reverse case arises for an Indian company, or a foreign company resident in India on its place of effective management, that pays tax abroad for a foreign year. Credit is allowed in the tax year in which the corresponding income is offered or assessed in India and, where that income is offered in more than one tax year, across those years in the same proportion (rule 76(1) and (2) of the Income-tax Rules, 2026; rule 128(1) and its proviso of the 1962 Rules). For a company, Form No. 44 is verified by an accountant whatever the amount of foreign tax (rule 76(16)(a)), a requirement that rule 128 of the 1962 Rules does not impose on Form No. 67; the other requirements and time limits of both forms, the certificate’s period and the decisions on treaty residence of an individual for part of a year are taken in Part 1.

Open questions, argued both ways

The numbering continues from Part 1, which takes open questions 1 to 6. Part 3 takes 11 to 13.

Open question 7: does Circular 8/2017 take a company with turnover of Rs 50 crore or less outside section 6(3)(ii), and does it survive under the 2025 Act?

That it does not (the Revenue). Section 6(3)(ii) contains no threshold. Parliament enacted the place of effective management test for every foreign company, and a circular under section 119 cannot exempt a class of companies from a residence rule that Parliament made universal; the Board’s power is to issue orders, instructions and directions for the proper administration of the Act, not to amend it. Tiger Global (paragraph 27) holds that circulars issued earlier, though binding on the Revenue when issued, “operate only within the legal regime in which they were issued and cannot override subsequent statutory amendments”; the Revenue would extend that reasoning to a circular that cuts down a statutory rule it post-dates. Under the 2025 Act the point is stronger: section 536(2)(j) continues a circular only “so far as it is not inconsistent with the corresponding provisions of this Act”, and a circular that disapplies section 6(10)(a)(ii) for small companies is inconsistent with a sub-section that has no threshold. Section 239(3)(a)(i) of the 2025 Act, like section 119(2)(a) of the 1961 Act, allows general orders setting forth directions or instructions “(not being prejudicial to assessees)” as to the guidelines, principles or procedures to be followed by other income-tax authorities, which is a power over procedure, not over who is resident.

That it does (the assessee). A circular under section 119 binds every authority administering the Act, and the Assessing Officer cannot take a position against it. Azadi Bachao Andolan upheld a circular that told officers to accept a certificate of residence as sufficient evidence, observing that it did not “crib, cabin or confine” the officers’ powers but formulated broad guidelines; Circular 8/2017 is of the same kind, a direction to officers not to pursue small companies on POEM. It is beneficial to the assessee, and the Board’s power to relax in the assessee’s favour is the core of section 119; the same clause the Revenue relies on, section 239(3)(a)(i) of the 2025 Act and section 119(2)(a) of the 1961 Act, contemplates directions that are not prejudicial to assessees, and a direction not to apply clause (ii) to small companies is of that kind. Under the 2025 Act it is deemed to have been issued under the corresponding provision, section 239, and it is not inconsistent with section 6(10) in the sense of section 536(2)(j), because it does not contradict the definition but limits the cases in which the Department will apply it.

Our view. The circular binds the Department and the Assessing Officer cannot hold a foreign company with turnover or gross receipts of Rs 50 crore or less resident on POEM for any year to which it applies. Whether a court would uphold it if its validity were squarely in issue is open; the case in which that would arise is unusual, a small company that wants to be resident in India and relies on the statute against the circular. Under the 2025 Act we think the circular continues by section 536(2)(j), but the inconsistency argument is not frivolous, and a company relying on it for tax year 2026-27 onwards should expect it to be tested. The circular does not say how turnover is measured or for which financial year; a company near the line should compute it on its own accounts for the year in question and keep the computation on file.

Open question 8: who has to prove where the place of effective management is, and does the presumption in paragraph 7 bind the Assessing Officer?

That the company must prove it is non-resident (the Revenue). Residence is a fact peculiarly within the company’s knowledge: where its directors were, who drafted its decisions, who approved them, and where. Section 6(10)(a)(ii) of the 2025 Act, like section 6(3)(ii) of the 1961 Act, contains no presumption either way. The Supreme Court in Subbayya Chettiar held, in the case of a family, that where an assessee called upon to produce the correspondence that might have shown where control was exercised does not produce it, the normal presumption of residence is given effect to. Paragraph 10 of Circular 6/2017 says the principles are for guidance only and no single principle is decisive, so paragraph 7’s presumption does not tie the Assessing Officer’s hands where the facts show decision-making in India.

That the Department must prove it (the assessee). A foreign company is non-resident unless clause (ii) applies, and the Department, which asserts that it applies, must establish it. Under the old test the Tribunal in Radha Rani put that burden squarely on the Department, and nothing in the substituted clause shifts it. Subbayya Chettiar does not carry the Revenue’s point across. The “normal presumption” there was the one in section 4A(b) of the 1922 Act, under which a family was taken to be resident unless its case was brought within the exception, and the onus the family failed to discharge was the onus of proving that exception. Section 6(10)(a)(ii) of the 2025 Act, like section 6(3)(ii) of the 1961 Act, makes a foreign company resident only if its place of effective management is in India, and has no presumption of that kind to give effect to. Circular 6/2017 confirms that the burden is the Department’s: the Assessing Officer needs the Principal Commissioner’s approval to initiate (paragraph 11) and the collegium’s approval to find (paragraph 11.1), and paragraph 7.1 displaces the presumption only “if on the basis of facts and circumstances it is established” that the board stood aside. The presumption in paragraph 7 is a Board instruction under section 119 and binds the Assessing Officer like any other.

Our view. The legal burden of establishing that a foreign company’s place of effective management is in India lies on the Department. The presumption in paragraph 7 binds the Assessing Officer. Whether it binds the Commissioner (Appeals) is arguable: he is an income-tax authority required by section 239(1) of the 2025 Act (section 119(1) of the 1961 Act) to follow the Board’s instructions, but section 239(2)(b) of the 2025 Act, and clause (b) of the proviso to section 119(1) of the 1961 Act, bar instructions that interfere with his discretion in the exercise of his appellate functions. It does not bind the Tribunal or a court, which apply the statute. The evidential position can shift quickly: a company that, called upon, does not produce board papers, travel records or correspondence it alone holds risks the Assessing Officer’s finding standing on the material he has, as the finding against the family stood in Subbayya Chettiar. A company that claims the presumption must prove the four ABOI conditions and the location of its board meetings; once it has, the Department must establish standing aside.

Open question 9: what happens when the place of effective management is in India for part of the year?

That the company is resident for the year (the Revenue). The statute asks whether the place of effective management is in India “in that year”, and a company whose POEM was in India during the year satisfies those words. Circular 6/2017 at paragraph 10 tells officers not to take a snapshot, to look at activities over the year, and, where the POEM is found both in India and outside India during the year, to presume it is in India if it has been mainly or predominantly in India. There is no split-year concept in section 6, and a company cannot be resident for part of a year.

That it is not (the assessee). The definition speaks of a single place, and paragraph 6 of the circular accepts that there can be only one place of effective management at any time. If the place moved during the year, the company had its POEM outside India for part of the year, and the statute does not say which part prevails. Paragraph 10’s predominance test is the Board’s limitation on its own officers: if the POEM was not mainly or predominantly in India, the Department has bound itself not to hold the company resident. A company whose decisions were taken abroad for most of the year, with a few months of management from India during a transition, is not resident on the Board’s own test.

Our view. The Department is held to paragraph 10. Where the POEM was in India for part of the year only, the Assessing Officer has to show that it was mainly or predominantly in India over the year, and a finding that does not weigh the two periods against each other is open to challenge. Whether a court construing the statute without the circular would adopt the same predominance test, or a stricter one, is open. On a file where a company moved its management during a year, the record should show the date of the move and the decisions taken before and after it.

Open question 10: after Tiger Global, can the Assessing Officer go behind a certificate of residence to test the place of effective management under the treaty?

That he can (the Revenue). Tiger Global holds that a certificate under section 90(4) is an eligibility condition, not sufficient evidence, and not binding on an authority “unless the authority or Court enquires into it and comes to its own independent conclusion”, the certificate before it being one that “lacks the qualities of a binding order” (paragraph 37); that holding a certificate does not prevent an enquiry (paragraph 43); and that Assessing Officers may determine where entities are really resident “by investigating the centre of their management” (paragraph 29), words the Court adopted although Azadi Bachao had recorded them only as the respondents’ contention. Where the treaty keeps the POEM tie-breaker, as the treaties with Singapore and the UAE do because those countries reserved against Article 4 of the Multilateral Instrument, and the treaty with Mauritius does because Mauritius has not covered it, a finding that the company’s place of effective management is in India answers the tie-breaker in India’s favour. Where the treaty’s tie-breaker has been replaced by the MLI’s mutual agreement test, as in the treaties with the Netherlands and the United Kingdom, the company has no relief until the competent authorities agree, and the Assessing Officer can assess in the meantime.

That he cannot, or only within limits (the assessee). Tiger Global’s statement about enquiry is conditioned: holding a certificate does not prevent an enquiry “if it is established that the interposed entity was a device to avoid tax”, which is the language of the anti-avoidance rules, not a general licence to re-determine residence in every case. Paragraph 29 is conditioned too: the power to investigate the centre of management is stated as following from the provisions having “undergone a sea change by amendments to Chapter IX, Chapter XA of the Act and Rule 10U”, that is, from the amended treaty-relief provisions of Chapter IX and the general anti-avoidance rule in Chapter X-A and rule 10U, and it reaches no further than they do. Azadi Bachao Andolan holds that the POEM test applies only for the tie-breaker, and the tie-breaker arises only after the company is found resident in both States under paragraph 1, which asks about the other State’s law; the other State’s certificate is the best evidence of its own law. Blackstone held, before Tiger Global, that the Revenue cannot go behind a certificate; the Supreme Court has since granted the Revenue leave against that judgment and stayed it, though it also kept the Revenue from collecting the tax assessed in the meanwhile. And even where the Assessing Officer may enquire, he must establish POEM in India on evidence and on the Board’s own guidelines, including the procedure in paragraphs 11 and 11.1. Where the Multilateral Instrument has replaced the tie-breaker, as with the Netherlands and the United Kingdom, its Article 4(1) does not deem the company resident in India; it obliges the competent authorities to “endeavour to determine by mutual agreement” its residence, having regard to its place of effective management, the place of incorporation and other relevant factors, and pending agreement withholds treaty relief only “except to the extent and in such manner as may be agreed upon”. The Assessing Officer’s domestic finding is not the competent authority determination the Article requires, and an assessment that denies relief on the footing that India has already won the tie-breaker anticipates an agreement that has not been reached; a company that has applied should ask that collection be kept in step with the mutual agreement procedure.

Our view. After Tiger Global a certificate does not close the enquiry, and Blackstone, decided before it and stayed by the Supreme Court pending the Revenue’s appeal, cannot be relied on for the proposition that it does. But paragraph 43 frames the enquiry around an interposed entity that is a device to avoid tax, and paragraph 29 rests the power to investigate the centre of management on the amendments it names. Where the Department’s case is simply that the company is resident in India on POEM, it must prove that case like any other, on the evidence of where key decisions were taken and with the procedural safeguards of Circular 6/2017. For a treaty in which the MLI has replaced the tie-breaker, the company should apply to the competent authority at the first sign of a dual-residence claim; the treaty text gives it relief only to the extent the authorities agree. The text supports the Revenue that relief is suspended, but not that the Assessing Officer’s finding settles the company’s residence under the treaty.

On a live file

The checks below are for a foreign company whose residence is in issue. Tax year 2026-27 onwards is governed by section 6(10) of the 2025 Act; assessment years 2017-18 to 2026-27 (previous years 2016-17 to 2025-26) by section 6(3)(ii) of the 1961 Act, which continues for them under section 536(2)(c) of the 2025 Act; and years up to assessment year 2016-17 by the control and management test.

1. The year and the test. Identify which test governs each year in issue. A notice or order for a pre-2017 year that proceeds on place of effective management or cites Circular 6/2017 has applied the wrong law; take it as the first ground.
2. The threshold. Compute turnover or gross receipts for the financial year on the company’s own accounts. If it is Rs 50 crore or less, Circular 8/2017 takes clause (ii) out of play against the Department; for tax year 2026-27 onwards, expect its continuance under section 536(2)(j) of the 2025 Act to be tested (open question 7).
3. The approvals. Ask for the Principal Commissioner’s approval to initiate under paragraph 11 and the collegium’s approval under paragraph 11.1, with dates, and insist on the hearing before the collegium. Their absence is a ground of appeal.
4. The ABOI computation. Prepare the four ratios for the year and the two preceding years, on the circular’s own measurement rules: income as computed under the home country’s tax law, assets at average tax values, headcount at two dates including contractors, payroll including social costs. Watch the payroll ratio wherever senior managers are resident in India.
5. Board meetings. Prove where each meeting was held and who attended from where. Where a director joined from India, say so in the minutes; a minute that records attendance in Singapore by someone shown by his travel record to be in India is the Department’s best evidence.
6. Standing aside. If the company relies on the presumption, show that the board decided, not merely ratified. Separate group-wide policies (payroll, accounting, HR, IT, supply chain, routine banking) from entity-specific approvals, and identify any approval threshold that sends decisions to the Indian parent.
7. The two stages. For a company not in active business outside India, identify who made the key decisions in the year and where, decision by decision, with the documents. Answer each paragraph 8.2 factor, including where the decision-makers usually reside.
8. Isolated facts. Where the finding rests on ownership by an Indian company, the residence of some directors, a permanent establishment, local management of Indian activities or auxiliary support functions, cite paragraph 9 and Example 5.
9. Part-year management. If management moved during the year, record the date and weigh the two periods under paragraph 10.
10. First year of residence. If residence is held, claim the adaptations in Notification No. 29/2018 (issued under section 115JH and continued for section 220 of the 2025 Act so far as not inconsistent), including the foreign company rate, and test the computation against them.
11. The treaty. Read Article 4 for the year. Check whether the company is a resident of the other State under its paragraph 1, which for the UAE means managed and controlled wholly in the UAE. Check whether the other State covered its treaty with India and reserved against MLI Article 4; if it did not reserve and both notified, the competent authority rule applies and an application should be made; if only one notified, Article 4(1) applies only to the extent the treaty is incompatible with it.
12. The certificate. Hold the certificate for each year, the Form No. 41 or Form 10F information, and the documents behind it. Where the other State’s year is not April to March, hold certificates that between them cover the Indian tax year, and state the period of each. After Tiger Global the certificate is necessary, not sufficient.
13. Pre-2017 authority. For pre-2017 years, cite Narottam and Pereira and Radha Rani on de facto central control and the burden, noting the Revenue’s appeal against Radha Rani (ITA 106/2008), and cite the sentence in Nandlal Gandalal that the head and brain of a company is the board of directors as Hidayatullah J’s dissent; the majority’s own statement that control and management signifies “the head and brain” may be cited as the Court’s.

Concordance: Income-tax Act, 2025 and Income-tax Act, 1961

Subject	Income-tax Act, 2025	Income-tax Act, 1961
Residence of a company	Section 6(10)	Section 6(3)
Place of effective management, definition	Section 6(10)(b)	Explanation to section 6(3)
Resident for one source, resident for all	Section 6(12)	Section 6(5)
Not ordinarily resident (individuals and Hindu undivided families only)	Section 6(13)	Section 6(6)
Scope of total income	Section 5	Section 5
Income deemed to accrue or arise in India	Section 9	Section 9
Company	Section 2(28)	Section 2(17)
Indian company	Section 2(53)	Section 2(26)
Resident	Section 2(96)	Section 2(42)
Foreign company resident in India for the first time	Section 220; notification continued by section 536(2)(j) so far as not inconsistent	Section 115JH; Notification No. 29/2018
Rectification on breach of notified conditions	Section 287	Section 154
Agreements for double taxation relief	Section 159	Sections 90 and 90A
Act applies only where more beneficial	Section 159(4)	Section 90(2)
General anti-avoidance rule applies notwithstanding the treaty	Section 159(6)	Section 90(2A)
Higher rate for a foreign company not less favourable	Section 159(5)	Explanation 1 to section 90
Certificate of residence; other documents	Section 159(8)(a), (b)	Section 90(4), (5)
Relief where there is no agreement	Section 160	Section 91
General anti-avoidance rule	Chapter XI	Chapter X-A
Instructions to subordinate authorities	Section 239	Section 119
Information for treaty relief	Rule 75(1), Form No. 41	Rule 21AB(1), Form 10F
Certificate of residence for an Indian resident	Rule 75(3), (4), Forms No. 42 and 43	Rule 21AB(3), (4), Forms 10FA and 10FB
Foreign tax credit: year of credit, apportionment, statement and time	Rule 76(1), (2), (10) to (13), (16); Form No. 44	Rule 128(1) and proviso, (8), (9); Form No. 67 (no counterpart to rule 76(16))
Proceedings for years before 1 April 2026; circulars continued	Section 536(2)(c), (j)	Not applicable

Decisions referred to in this Part

Decision	Court and date	Cited for
V.V.R.N.M. Subbayya Chettiar v. CIT	Supreme Court, 21 December 1950	Head and brain; De Beers quoted; onus where evidence called for is not produced
De Beers Consolidated Mines Ltd. v. Howe	As quoted in Subbayya Chettiar (Lord Loreburn)	Where a company keeps house and does business
Swedish Central Railway Co. Ltd. v. Thompson	As quoted in Subbayya Chettiar	Head and seat and directing power; divided control
Narottam and Pereira Ltd. v. CIT	Bombay High Court, 6 March 1953	De facto central control; business done abroad irrelevant
CIT v. Nandlal Gandalal	Supreme Court, 21 April 1960	Board as head and brain (Hidayatullah J, dissenting)
Radha Rani Holdings (P) Ltd. v. Addl. DIT	Income-tax Appellate Tribunal, Delhi, 31 May 2007	Burden on the Department; control where the board meets
Union of India v. Azadi Bachao Andolan	Supreme Court, 7 October 2003	POEM only for the tie-breaker; Circular 789
Skaps Industries India Pvt. Ltd. v. ITO	Income-tax Appellate Tribunal, Ahmedabad, 21 June 2018	Absence of a certificate not fatal to a treaty claim proved otherwise
Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. v. ACIT	Delhi High Court, 30 January 2023; Supreme Court granted leave and stayed it, 12 January 2024	Revenue cannot go behind the certificate (decided before Tiger Global)
Sage International Inc. v. ACIT	Income-tax Appellate Tribunal, Delhi, 10 April 2023	Self-declared POEM residence; foreign tax credit
THR Infrastructure Pte. Ltd. v. DCIT	Income-tax Appellate Tribunal, Delhi, 12 May 2023	POEM in Singapore on board meetings and directors
Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings	Supreme Court, 15 January 2026	Certificate an eligibility condition; enquiry into centre of management

Part 1 takes up individuals: the 182-day and 60-day limbs and their exceptions, the 120-day limb, deemed residence under section 6(7) of the 2025 Act and section 6(1A) of the 1961 Act, not ordinarily resident status, the treaty ladder for individuals and the FEMA contrast, with open questions 1 to 6. Read it at Residential status of individuals: section 6 days test and deemed residence. Part 3 takes up Hindu undivided families, firms, LLPs, associations of persons, trusts and every other person, where the word “wholly” still does the work, with open questions 11 to 13. Read it at Residence of HUFs, firms, LLPs, AOPs and trusts: control and management.

This note is general commentary on the law as at 11 November 2026 and is not advice on any matter. The position in a particular case depends on its own facts.